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Getting started with a direct pay practice

Publication
Article
Medical Economics JournalDecember 25, 2019 edition
Volume 96
Issue 24

Practice transformation to a direct pay or concierge model is one solution physicians are taking to deal with burnout, declining revenue and payer hassles.

Direct pay practices can be one option for doctors looking for freedom

Physician burnout is an epidemic that’s rattling the healthcare field as much as any illness, leaving many physicians wondering how they can continue to practice medicine. Practice transformation to a direct pay or concierge model is one solution physicians are taking to deal with burnout, declining revenue and payer hassles.

Direct pay practices charge patients a membership fee to pay for all costs of practicing. Concierge practices also charge a membership fee but bill some services to the patient’s insurance, as well. In both models, physicians tend to have smaller patient panels so they can give more time and attention to their patients.

For the physician with little or no experience in either model, getting started can be daunting, but experts who have already forged the path offer reassurance that transitioning to these models is a realistic goal, though it means learning to practice medicine in a new way.

When to leap

The biggest hurdle in the transition to direct pay practice may just be getting started, says Matthew Mintz, MD, FACP, a clinical associate professor at George Washington School of Medicine in Bethesda, Md. Mintz left a hospital two years ago to start his own direct pay practice after he ran the numbers and determined that he would need only 200 to 300 patients (of a panel of over 2,000) to follow him to be able to afford to make the leap.
“A good rule of thumb is that about ten percent of patients will follow you,” he says, and that was true for him.

By the time a physician is thinking of starting a direct pay practice, Mintz says, there’s very little point in waiting from a psychological standpoint. “It’s not worth it to stick around for another few years and be miserable trying to save up a few pennies. You’re better off making a clean break and taking out a loan, investing in yourself, essentially.”

He acknowledges that making such a choice is a leap of faith for many physicians, and that the comfort of a solid paycheck often leads people to stay in a traditional fee-for-service, insurance-based practice, even when they are miserable.

“The systems that we work for tend to de-value physicians, and the physicians then internalize that and de-value themselves. The one piece of advice I have is for physicians to know they are of value, and that people are going to be willing to pay for those services even without insurance,” Mintz says.

He charges his patients an annual membership fee that they can pay all at once, monthly or quarterly. It covers basic primary care services such as physicals, EKGs, and blood draws. For services beyond basic care, patients can bill their insurance, but he does not bill any insurance directly.

Erin Jackson, JD, a healthcare lawyer with Jackson LLP in Chicago, who helps physicians make the transition to concierge care, urges physicians to be aware of their patient demographics before the practice transition, and to plan about six to nine months in advance. “Not only do you need to determine if there are patients there to support your practice, but can your patients afford a direct pay model?”

An additional $50 to $100 per month may be more than some patients can afford, she cautions. Alternatively, a physician may be aware of a need or gap in healthcare in their community that they can fill for patients who are already paying high deductibles and often have to wait months to see their physicians.

Jackson also encourages physicians to evaluate their personal motivation for setting up a direct pay practice. “I start the conversation about what you are hoping your life’s going to look like,” she says. She helps her clients make sure that they are getting into concierge/direct pay for the right reasons-usually to focus more on patient care and to spend less time on paperwork. 

Getting help in the process

Starting a direct pay practice can mean leaving behind much of the staff of a traditional practice, including medical assistants, scribes, billers and coders, Dan Wohgelernter, MD, a cardiologist in Santa Monica, Calif., did not try to go it entirely alone. He contracted with a third-party organization called Concierge Choice Physicians that helps set up the administrative aspects and address any legal concerns. “Just like I think patients shouldn’t be their own doctors, doctors shouldn’t be their own lawyers,” Wohgelernter says.

Under this arrangement, Concierge Choice takes a fee. They were especially useful helping him transition away from a hybrid model, where he charged an annual fee, but still billed patients’ insurance, which eventually met with limitations, to a completely direct pay model.

His hybrid model recruited those patients he treats frequently, or ongoing, who had greater need for intervention into the concierge side, where they would pay an annual membership fee and gain access to him 24/7, with few exceptions. “This entitled patients to have this type of enhanced relationship with me.” For hospital visits, procedures and diagnostic tests, he still billed their insurance. 

But eventually, the hybrid model began to fail. “The disadvantage of the hybrid model is that you are creating an exit ramp for patients who might otherwise want to stay with you,” Wohgelernter says. “And the patients who were paying the extra fee often resented me seeing other patients who weren’t signed up.”

He soon made the decision to get rid of insurance and go completely direct pay. While it was hard to say goodbye to some patients, the new model has changed his life and how he practices. He spends between 30 and 60 minutes with each patient instead of 10 to 15. “You are really able to fulfill the requirements of the art of medicine,” he says. “Patients love it, and I feel that I’m fulfilling what I always envisioned in my role as a doctor.”

Jackson also favors a direct pay or concierge model over hybrid because it’s more streamlined and easier to navigate from a legal and financial standpoint. “Hybrid models raise more red flags. And traipsing through the regulations can be extremely tedious. There’s a lot more opportunity for messing up if you’re taking insurance,” Jackson says.

She reminds physicians that there are legal gray areas in matters such as marketing and fundraising that it’s useful to engage a lawyer on, no matter whether they enter a hybrid or complete direct pay model, “So long as you practice medicine you cannot escape the legal restrictions upon your license,” Jackson says.

Unlike Wohgelernter, who relies upon the support of a third-party organization, Daniel Paul, MD, an orthopedic surgeon and founder of Easy Orthopedics in Colorado Springs, Colo. found that setting up a concierge practice did not require much outside expertise and allowed him to simplify processes because he does not have to seek reimbursement from insurance companies. He uses a HIPAA-compliant Google Drive in place of an EHR and acts as his own receptionist. “You save so much time in administrative junk,” Paul says. “My notes are basically just a narrative. You don’t have to pre-authorize or anything.”

Moreover, changing to concierge is not so much about administrative functions, as it is personal ones. “You can’t just take your existing practice and strip out all the insurance and expect it to work, because it won’t. A concierge practice is relationship-based medicine, which means spending more time with people,” Paul says.

Paul also points out that the transition might involve rethinking finances and lifestyle altogether. “If you’ve got a super expensive house and car and all your kids are in private school, you might have locked yourself into your job. The first step is downsizing yourself to prepare for this period of not making a lot of money.”

However, he says that these sorts of life changes are worth the results. “I will bet you money that [physicians who transition to concierge] will be happier than they were before.”

How to talk to patients about the transition

Perhaps the scariest part of the transition to direct pay is letting patients know and hoping they will follow. “It takes convincing patients at first,” Paul says. “But if you have established relationships with these patients you can explain, ‘Now I can practice how I want, and provide you with better patient care.’”

Erin Jackson says that physicians who want to thrive in this model need to educate their patients on the benefits. Since overhead costs will go down, physicians should budget more money for reaching out to patients to discuss the value of the model.

“Patients feel like they’re paying cash anyway with these massive deductibles. So they get to cut through all of the red tape and have access to a physician 24/7. I think it allows the patient to feel much more content with their relationship with their physician,” Jackson says.

Wohgelernter agrees that patients benefit as much as physicians. “There are so many aspects of the concierge relationship that not only improve the quality of patient care but also actually reduce costs for the patient and the system,” he says.

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